For an economist or a development specialist listening to and reading about the things that four of the five Presidential candidates have been saying about taxes is a very scary experience. The only candidate who is talking sense is Sen. Miriam Defensor-Santiago.
In any democratic electoral exercise the two most often used verbs, when the discussion is about economic issues, are ‘remove’ and ‘reduce.’ In their overwhelming desire to gain the electorate’s attention and support, candidates promise that, when elected, they will remove various restrictions installed by the authorities in furtherance of the nation’s economic interest and will reduce taxes and other diminutions of individual financial entitlements. Although the removal of restrictions on certain kinds of economic activity figures often in the public discourses of candidates, it is the lightening of the tax burden on income and property—through reduction and reclassification—that candidates dwell on in their appeals for voter support.
To be sure, the Presidential candidates—Mar Roxas, Jejomar Binay, Grace Poe and Rodrigo Duterte—have been phrasing their tax and other fiscal proposals in a way that has made them reasonable and tolerable. The proposals have been laced with phrases like “promoting greater social justice” and “leveling the tax playing field.” But close examination of the proposals is not required for their characterization as unsound and dangerous.
One does not need a degree in mathematics or statistics to be able to appreciate that for a total to remain stable, a subtraction therefrom must be replaced by a figure of more or less the same magnitude. One cannot keep on subtracting from a total without causing the total to become unstable and undependable. If a reduction or downward reclassification of a tax is proposed, there must be a substitute fiscal measure of more or less similar revenue potential if the national tax base is not to be further eroded. As things stand, this country has a comparatively narrow tax base, thanks to the notorious incidence of income tax evasion.
Sen. Santiago said everything that Philippine and foreign economists have wanted to say when, speaking about the spate of tax-reduction proposals, she blurted out, “Who’s going to pay for all of this?” The answer? The Philippine economy, in terms of even greater government inability to provide adequate physical infrastructure for productive activity and social infrastructure for the citizenry’s well-being.
Tax relief and fiscal benefits are what voters want from candidates, and candidates, in tell-them-what-they-want-to-hear fashion, are usually only too willing to oblige. The result is that, on the day after an election, the ground is littered with tax and other fiscal proposals that, because of their extravagant character, are mostly going to be unfulfilled. The classic example of candidate infidelity in this regard is US Presidential candidate George H. Bush’s “Read my lips” answer to a voter question as to whether he would raise taxes if re-elected. Untrue to his campaign promise, the re-elected President’s administration supported Congressional tax-raising proposals.
Candidates Roxas, Poe, Duterte and Binay presumably have advisers who give them counsel on fiscal matters. Either these advisers know what they are doing and give their candidates sound advice—don’t promise the electorate tax benefits that are economically unsound—or they are of the same election-driven mindset as the candidates. The way the candidates are sounding, the latter seems to be the case.
Can a Philippine Presidential candidate not make unsound tax promises and still emerge victorious? He can. It is possible for him to not go fiscally berserk and still prevail at the ballot box. The Presidential-candidate ear to which I have ever come close was Fidel V. Ramos’s in 1992. FVR made no economically outrageous tax promises, yet, as we know, he got to Malacanang.
All the 2016 Presidential candidates have said that they will expand the coverage of the 4Ps (Pantawid) program. And budget more spending for the physical infrastructure that the economy is woefully short of. How can that be done with a further-eroded tax base?
A noted political commentator once called election time “the silly season.” Economists and fiscal experts wholeheartedly agree.
With only about seven weeks left before Election Day, it is almost certainly too late to expect one of the candidates to come out with a coherent, well-thought-out tax program. Sen. Santiago will probably have to go without an answer to her question.
E-mail: rudyromero777@yahoo.com